Kathleen Lynch (Cork North Central, Labour) | Oireachtas source

I apologise for being late; I expected the previous business to go on a little longer.

I am taking this matter on behalf of the Minister for Social Protection, who is in Brussels today. It is acknowledged that the fundamental problem facing occupational pension schemes is that pensions are significantly more expensive due to increasing life expectancy and lower than expected investment returns, which are reflected in increased annuity rates.

The Pensions Regulator suspended the funding standard four years ago, following the downturn in the financial market, to give trustees-employers an opportunity to assess the impact on pension funds and to give them time to develop responses to the challenge. The reintroduction of the funding standard was delayed on a number of occasions pending changes to legislation which were designed to help trustees respond to the funding challenges facing pension schemes. The Government also introduced the following measures to ease the funding pressures on defined benefit schemes while the funding standard was in abeyance: removal of the priority given to post-retirement increases for pensioners to ensure a more equitable distribution of assets in the event of the wind-up of a defined benefit scheme; the pensions insolvency payments scheme was established to reduce the cost of purchasing pensions for trustees where the employer has become insolvent; and the introduction of the sovereign annuity initiative.

The purchase of a sovereign annuity is an option which the trustees of a scheme can exercise in order to reduce scheme liabilities. The sovereign annuity market is still in the early stages and demand for sovereign annuities remains to be seen. However, last August, the National Treasury Management Agency announced details of the sale of €1.021 million of Irish amortising bonds of between 15 and 35 years duration. It is anticipated that the NTMA will be in a position to issue further bonds as pension fund trustees complete their funding plans in line with the funding standard.

The funding standard provides a benchmark against which the health of a scheme can be tested. The existence of the funding standard itself is not the central issue in regard to whether a scheme is properly funded. Rather the responsibility rests with the employer and the trustees for ensuring that the scheme is properly funded and managed. However, the funding standard does provide the regulatory mechanism for ensuring that a scheme can live up to the promised level of pension benefits. The requirement for a risk reserve is also being introduced from 2016, to provide a level of protection for scheme members against future volatility in financial markets. It is accepted that the requirement for a risk reserve presents an added challenge for schemes, however, guidance issued by the regulator identifier options which the scheme can consider in meeting this requirement by 2023. This guidance is being kept under review. Overall, the changes made to defined benefit schemes are intended to bring increased stability to pension promises in the future and lessen the exposure to risks of schemes.

I am not certain that this answers the Deputy's question. There are no plans to remove the pension levy at this time. I do not say it is not under review but there are no plans to remove it.

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